November 8, 2018 / 9:13 PM / 10 days ago

Activision Blizzard's holiday-quarter forecasts miss estimates

(Reuters) - Activision Blizzard Inc (ATVI.O) on Thursday forecast fourth-quarter profit, revenue below analysts’ estimates and the video game publisher said the “Destiny” game franchise was underperforming its own expectations.

FILE PHOTO - Gamers play Call of Duty: Black Ops 4 at the Paris Games Week (PGW), a trade fair for video games in Paris, France, October 25, 2018. REUTERS/Benoit Tessier

The company’s shares were down 10.8 percent at $56.02 in after-market trading.

“Destiny 2: Forsaken” was released in September and is a major expansion pack to the company’s hugely popular “Destiny 2” first-person shooter game.

“While Forsaken is a high-quality expansion with strong engagement and new modes of play, we did not achieve our commercial expectations, and there’s still work to do,” President Collister Johnson said on a post-earnings call.

For the fourth quarter, Activision forecast an adjusted profit of $1.27 per share and adjusted revenue of $3.05 billion.

Analysts on average had expected the company to earn $1.34 per share on revenue of $3.06 billion, according to IBES data from Refinitiv.

Activision released “Call of Duty: Black Ops 4”, the latest version of its blockbuster franchise on Oct. 12 and earned more than $500 million in the first three days of release.

However, the initial sales figures disappointed investors who had higher expectations. Despite that, analysts seem to believe “Black Ops 4” has started well.

“The Q4 forecast is below expectations probably to give them some headroom given the holiday period is always a bit less predictable, but Black Ops 4 looks like it’s off to a strong start,” Atlantic Equities analyst Kunaal Malde said.

The success of games from the “battle royale” genre such as “Fortnite” and “PlayerUnknown’s Battlegrounds” has also somewhat challenged game publishers like Activision and Take Two Interactive Software Inc (TTWO.O).

To cash in on the genre’s popularity, Activision launched a battle royale mode in its “Call of Duty: Black Ops 4” game.

The company has also faced backlash from the gaming community after one of its studios revealed “Diablo Immortal”, the latest installment of its popular franchise would be a mobile game, rather than announcing the much awaited “Diablo 4” at BlizzCon, its annual gaming convention.

Activision’s net income rose to $260 million, or 34 cents per share, in the third quarter ended Sept. 30, from $188 million, or 25 cents per share, a year earlier.

On an adjusted basis, the company earned 52 cents per share. Total adjusted revenue fell nearly 13 percent to $1.66 billion.

Analysts on average had expected revenue of $1.66 billion and profit of 50 cents per share.

Reporting by Arjun Panchadar in Bengaluru; Editing by Shounak Dasgupta

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